GOP: Offsetting cuts must cover payroll tax relief

WASHINGTON — Republican congressional leaders stressed a willingness Wednesday to extend a Social Security payroll tax cut due to expire Dec. 31, setting up a year-end clash with Democrats over how to pay for a provision at the heart of President Barack Obama's jobs program.

"We just think we shouldn't be punishing job creators to pay for it," said Senate Republican leader Mitch McConnell, scorning a Democratic proposal to raise taxes on million-dollar income earners.

Instead, Senate Republicans called for a gradual reduction in the size of the federal bureaucracy, as well as steps to make sure that million-dollar earners don't benefit from unemployment benefits or food stamps. They also recommended raising Medicare premiums for those with incomes over $750,000 a year.

House Speaker John Boehner said flatly that any tax cut extension will be offset by cuts elsewhere in the budget.

The events in Congress, coupled with Obama's fresh appeal for renewal of the payroll tax cut while speaking Wednesday in Scranton, Pa., indicated that leaders in both parties want to seek a compromise less than a week after Congress' high-profile supercommittee failed to find common ground on a related economic issue, a plan to reduce deficits.

Yet nearly a full year before the 2012 elections, it also appeared that lawmakers in both parties are eager to compete for the political high ground before any compromise can be struck on the payroll tax or an extension of unemployment benefits that Republicans also said they might approve.

Senate Democrats have set a vote for later in the week to pay for the tax cut renewal by imposing a permanent 3.25 percent surtax on individuals or couples earning more than $1 million a year, a political maneuver designed to cast Republicans as the protectors of the wealthy.

The proposal has no chance of gaining the 60-vote Senate majority needed for approval.

The Senate Republican alternative envisions extending an existing pay freeze for government workers through 2015 and gradually cutting the government workforce by 10 percent, or 200,000 positions.